IMPACT OF INFORMATION ASYMMETRY ON ACCESS TO FINANCE BY SMES: THE MODERATING ROLE OF FINANCIAL REGULATIONS

Abstract

This study examined the impact of information asymmetry on access to finance by SMEs and the
moderating role of financial regulations. Cross-sectional research design was employed to collect
data from the SMEs owners/managers in northern Nigeria. Population of the study consisted of
SMEs in the sixteen states out of the nineteen states in northern Nigeria, including FCT. The study
used data from 425 respondents out of 493 sample size adopted through stratified random
sampling. Questionnaires were distributed and collected through the personally-administered
method. A Partial Least Square Structural Equation Modeling (PLS-SEM) was used to analyse the
data with the aid of Smart PLS 3.2.8 and to test the hypotheses of the study. The findings show that
information asymmetry has negative and significant impact on access to finance. Again, financial
regulations do moderate the impact of information asymmetry on access to finance by SMEs in
Northern Nigeria. The study therefore, conclude that information asymmetry reduced SMEs access
to finance and effective financial regulations improve access to finance. Thus the study recommend
that CBN should continue to implement policies that will reduce information asymmetry and SMEs
be encouraged to make information more available to enable access to finance.